U.S. ratification of UNCLOS key to development of deep seabed mining industry
The development of deep seabed claims is incredibly expensive. Companies in the U.S. are reluctant to invest heavily in deep seabed mining because of the risk that their activities would not withstand a legal challenge since the U.S. is not a party to the Convention. Conversely, foreign companies, because their governments have joined the Convention, have access to the international bodies that grant the legal claims to operate in the deep seabed area. The U.S. cannot represent the interests of its companies in those bodies.
Quicktabs: Arguments
Offshore oil and natural gas exploration along the extended continental shelf – an area beyond the 200-nautical-mile EEZ – is expected to increase U.S. reserves over the next decade. However, the United States cannot secure internationally recognized sovereign rights to those resources unless it ratifies LOSC. While the United States enjoys national jurisdiction over living and non-living resources above and below the seabed out to 200 nautical miles, claims to resources beyond the EEZ must be formally made to the U.N. Commission on the Limits of the Continental Shelf, the international body established by LOSC for parties to adjudicate claims to the extended continental shelf. Without the United States ratifying LOSC, U.S. companies operating beyond the EEZ would be considered on the high seas and beyond the formal legal protection of the United States. As a result, offshore drilling companies have increasingly expressed their concern about the lack of legal protections afforded to U.S. companies and have indicated a reluctance to assume significant risk in operating in areas beyond U.S. jurisdiction. In short, U.S. failure to ratify LOSC could have a chilling effect on commercial resource exploration and exploitation on the extended continental shelf.
First, without the protection now guaranteed by UNCLOS, U.S. companies are not likely to invest in deep seabed mining.109Almost Everyone Agrees: The U.S. Should Ratify the Law of the Sea Treaty — Stewart M. Patrick. — The Atlantic — Jun 10, 2012 [ More ] At a hearing before the Senate Foreign Relations Committee, Jay Timmons, President and CEO of the National Association of Manufacturers, spoke on manufacturers' behalf and expressed the hesitancy to invest: "[t]he development of deep seabed claims is incredibly expensive. Companies in the U.S. are reluctant to invest heavily in deep seabed mining because of the risk that their activities would not withstand a legal challenge since the U.S. is not a party to the Convention."110"Statement of Jay Timmons: The Law of the Sea Convention: Perspectives from Business and Industry (June 28, 2012) ." Testimony before the Senate Foreign Relations Committee, June 28, 2012. [ More (5 quotes) ] For instance, the Pacific Ocean contains a large supply of nodules, rock-like substances that contain minerals such as nickel, copper, and cobalt.111Mining the Seafloor for Rare-Earth Minerals — William J. Broad. — New York Times — Nov 09, 2010 [ More ] There is currently no cost-effective way to remove these nodules from the ocean floor.112Mining the Seafloor for Rare-Earth Minerals — William J. Broad. — New York Times — Nov 09, 2010 [ More ] It is possible that developing a procedure to extract the metal from the nodules will be the most expensive part of the process."113Mining the Seafloor for Rare-Earth Minerals — William J. Broad. — New York Times — Nov 09, 2010 [ More ] Further, methane hydrates114 are another potentially enormous alternative energy source found in the ocean with extraction technology in its infancy.115 Unless the United States accedes to UNCLOS, U.S. companies will be less likely to invest in deep seabed mining of the nodules and exploitation of methane hydrates, leaving untouched great resources that would add much revenue to the U.S. Treasury.
Moreover, to mine deep seabed minerals requires security of tenure for the billion dollar plus costs of such an operation. Our industry has emphatically reminded us that they cannot mine under a fishing approach in which mining is a free-for-all concept, as the critics seem to suggest. Rather, they must have both the exclusive rights to mine sites and international recognition of titles to the minerals recovered. These requirements led to the formation of a limited international agency to provide security of tenure and title for mineral resources of the seabed beyond national jurisdiction, which was otherwise owned by no one. The ISA was a necessary specialized agency of strictly limited jurisdiction to deal with security of tenure and stable property rights so that investors can amortize their debt. Quite contrary to the recent testimony of one critic before the Senate Committee on Environment and Public Works, the ISA would not have "the exclusive right to regulate what is done, by whom, when and under what circumstances in subsurface international waters and on the sea-floor." (12) Rather, the ISA is a small, narrowly mandated international agency that has emphatically no ability to control the water column and only functional authority over the mining of the minerals of the deep seabed beyond national jurisdiction. Again, this is a necessary requirement for seabed mining, an area beyond which any nation has sovereignty, to provide security of tenure to mine sites, without which mining will not occur. By not adhering to the treaty, the United States will simply lose its deep seabed mine sites--the best in the world--and our seabed mining industry will be permanently deep-sixed.
A third reason arguing for United States accession to the convention is the changing situation in the deep seabed mining industry. In the early 1980s many were predicting a major boom in the mining of deep seabed nodules of cobalt, manganese, nickel, copper, and other minerals. New research indicates that these predictions were early by decades.11 The likelihood of economically feasible deep seabed mining of nodules occurring soon appears increasingly remote, due primarily to the discovery of substitutes for many prod- ucts and applications and the availability of land-based supplies.12 Should seabed mining of nodules ever become of genuine strategic importance to the United States, plentiful quantities are expected to be available within national 200-mile exclusive economic zones as an alternative supply when market prices improve.13
Lockheed Martin, the only U.S. company with active claims to deep seabed sites under a U.S. law predating the Law of the Sea Convention, recently wrote to this Committee urging the Senate to approve the Convention. Lockheed has invested hundreds of millions of dollars on research and development related to deep seabed mining over the past 40 years. The company’s letter made clear that the multibillion dollar investments now required to launch an ocean-based resource development business will only occur if it can obtain the security of tenure and clear legal rights offered under the Convention. With Lockheed and potentially other U.S. companies poised to expand their operations and create new jobs, Senate accession to this treaty would allow investor dollars to stay here.
Equally important to U.S. companies contemplating deep seabed mining activities is U.S. leadership in the ISA. The next several years will be formative for the nascent deep seabed mining industry. As I mentioned earlier, the Convention’s deep seabed mining regime was overhauled in 1994, resulting in a system that is uniquely favorable to American interests. Those reforms included a permanent U.S. seat on the Council of the ISA. But the U.S. has not assumed that seat, and cannot guide the development of new rules pertinent to deep seabed mining activities while outside the Convention.
Lockheed Martin, a U.S. based company, has been a large proponent of recognizing the need for the ISA.120 In June 2012, the chairman of Lockheed Martin sent a letter to the U.S. Senate stating, “[Lockheed Martin] wanted to join the race for undersea riches, but could not assume investment risks until it was clear that it would have a clear legal title to its findings.”121 Lockheed Martin stated it is unwilling to do so absent U.S. ratification of UNCLOS.122
Lockheed Martin also participated in a 2012 movement known as The American Sovereignty Campaign, which was comprised of members from the government and private sector.123 The campaign’s goal was to send Congress a message: that U.S. accession to UNCLOS would “invite economic opportunity, create U.S. jobs, and protect business and commercial interests at home and abroad.”124 Lockheed Martin is the only U.S. based holder of exploration licenses granted by the ISA.125 Jennifer Warren, Vice President of Lockheed Martin stated, “business initiatives to exploit deep seabed mineral resources will only be able to secure the necessary financial investments if done pursuant to the existing international framework,” referring to the legal structure created by the ISA and UNCLOS.126
Moreover, mining companies much prefer the known difficulties of operating on land to those of operating on the seabed. The risks of working in a place where volcanic activity seems to have stopped but may suddenly resume are uncertain. So indeed are the possible obligations to repair the underwater environment: no legal codes are yet in place for deep-sea mining. That helps to explain why the only places in which companies have dipped more than a toe in the water are in exclusive economic zones, which are not just shallower than many parts of the distant ocean but also within the legal ambit of a national authority.
Seafloor mining beyond countries' territorial waters is regulated by the International Seabed Authority, set up under the United Nations Convention on the Law of the Sea. So far it has issued only eight licences, all for exploration, not production, all for nodules, not massive-sulphide deposits, and all to governmental or quasi-governmental agencies (of China, France, Germany, India, Japan, Russia, South Korea and an east European consortium). No wonder. Commercial miners want both a clear title to their holding and exclusive rights to exploit it. They also have to answer to shareholders.
The taxation objection made by opponents is often coupled with an argument that US companies that had invested millions of dollars in exploration costs would lose their existing claims under US law. This argument ignores the fact that the 1994 Agreement grandfathers these holders into the treaty regime based on arrangements no less favorable than those granted to holders of claims already registered with the Authority upon certification by the US government and the payment of a $250,000 application fee (a fee that is half of the fee established in the 1982 Convention). As Ambassador Colson pointed out in the 1994 hearings, "If the U.S. does not become Party to the Convention, international recognition of the rights of the U.S. licensed consortia could be jeopardized."
There are many misconceptions as to what the signing of UNCLOS would mean for the United States and deep seabed mining. It is argued that by ratifying UNCLOS, including the Agreement, states will inevitably have to discontinue their unilateral attempts at deep seabed mining.133 However, this is unfounded as the law of the deep seabed was intentionally not settled in order to produce solid negotiations of the sort that resulted in UNCLOS.134 Most, if not all, of the potential deep seabed mining nations are dedicated to the adoption of UNCLOS and the Agreement.135 The potential deep seabed mining countries understand that there is a lack of economic viability in the present deep seabed mining industry, and "it is inconceivable that the necessary financial markets would support unilateral mining if it is contrary to the principles" of UNCLOS.